Negotiable Instruments Law

Definition
1. Who is an accommodated party? (5 points)
An accommodation party is one who has signed the instrument as maker,
drawer or acceptor or indorser, without receiving value therefor, and for the
purpose of lending his name to some other person. (Sec. 29) An
accommodated party is one in whose favor an accommodation was made.

2. What is a mechanically incomplete and undelivered instrument? (5 points) Sec.

15
An instrument who is wanting in a material particular such as the amount of
the instrument or the name of the payee, and it is undelivered.

3. What is a mechanically complete but undelivered instrument? (5 points) Sec. 16

This refers to the instrument which is complete in form but not delivered.

4. What is a consideration and what constitutes value? (5 points)Sec.25

Consideration is the cause of a contract; it is the essential reason why a party

enters into a contract.
a. Value is any consideration sufficient to support a simple contract
b. An antecedent or pre-existing debt constitutes value, and is deemed such
whether the instrument is payable on demand or at a future time.

5. What is forgery?
By forgery is meant the counterfeit making or fraudulent alteration of any
writing, and may consist in the signing of another’s name, or the alteration of
an instrument in the name, amount, description of the person and the like, with
intent to defraud. (Sec. 23)

6. Who is an accommodation party? (5 points)

 An accommodation party is one who has signed the instrument as maker,
drawer or acceptor or indorser, without receiving value therefor, and for the
purpose of lending his name to some other person. (Sec. 29) An
accommodated party is one in whose favor an accommodation was made.

7. What is ante-dating and post-dating and what is/are its effect on the
instrument? (5 points)
Ante-dating – An instrument is ante-dated when the date written thereon is
earlier than the date of issue.
Post-dating - An instrument is post-dated when the date written thereon is later
than the date of issue.
a. An instrument is not rendered invalid provided it is not done for an illegal
or fraudulent purpose
b. The person to whom an instrument so dated is delivered acquires title
thereto as of the date of delivery

8. What is a mechanically incomplete but delivered instrument? (5 points)Sec. 14

This refers to an instrument which is wanting in a material particular such as
the amount of the instrument and it is delivered to another for him to fill the
blanks and negotiate it either for his own benefit or that of the person making
the instrument.
9. What is a consideration and what constitutes value? (5 points)Sec.25

Consideration is the cause of a contract; it is the essential reason why a party

enters into a contract.
c. Value is any consideration sufficient to support a simple contract
d. An antecedent or pre-existing debt constitutes value, and is deemed such
whether the instrument is payable on demand or at a future time.

10. What is Negotiation? (5 points) Sec. 30

Negotiation is the transfer of a negotiable instrument from one person to
another in such a manner as to constitute the transferee the holder of the
instrument.
Enumeration
1. When is an instrument payable at a fixed or determinable future time?
Enumerate 4. (5 points) Sec. 4
a. When it is expressed to be payable at a fixed period after date, such as
“Pay to P or order 30 days after date.”
b. When it is expressed to be payable at a fixed period after sight, such as
“Pay to P or order P1,000.00 30 days after sight.”
c. When it is expressed to be payable on or before a fixed determinable
future time specified in the instrument,
d. When it is expressed to be payable on or at a fixed period after the
occurrence of a specified event which is certain to happen, though the time of
happening be uncertain, “after death”

2. When is an instrument payable to order? Enumerate at least 4. (5 points)

Sec. 8
An instrument is payable to order when it is drawn payable to the order of a
specified person or to him or his order, such as “Pay to the order of RJ” or
“Pay to RJ or order.” If the instrument is payable to a specified person, the
instrument is not payable to order and is rendered non-negotiable, such as “Pay
to RJ the sum of P1,000.00” or “Pay to RJ or his agent the sum of P1,000.00”
An instrument may be drawn payable to the order of:
a. A payee who is not the maker, drawer or drawee.
b. The drawer or maker “Pay to order of myself/undersigned”
c. The drawee “Pay to order of yourself”
d. Two or more payees jointly “A,B and C”
e. One or several payees “A,B, and C or any two of them”
To the holder of an office for the time being “President of ABC Corp”
3. As a general rule, A person whose signature does not appear on an
instrument is not liable, what are the exceptions? Enumerate at least 4.
(5 points)Sec. 18, 20, 23, 65, 134, 125 & 137
 a. Where a person signs under a trade or assumed name
b. When an authorized agent signs for and on behalf of his principal, the latter
is liable.
c. Where a person forges the signature of another, the forger is liable
d. Where the acceptor accepts the instrument on a paper other than the bill
itself.
e. Where a person promises to accept in writing a bill before it is drawn
f. Where a person negotiates a bearer instrument by delivery
g. Where a drawee destroys a bill or refuses within 24 hours to return the bill
accepted or not accepted

4. Where and How is an Indorsement made?

Where a. on the instrument itself; or b. on a separate paper which must be

attached thereto to make an integral part of the instrument called allonge.

5. Kinds of indorsement?

a. Special
b. Blank
c. Restrictive
d. Qualified
e. Conditional

6. When is an instrument payable on demand? Enumerate 4. (5 points) Sec.

7
a. When it expressed to be payable on demand such as “I promise to pay P
or bearer P5,000.00 on demand.”
b. When it is expressed to be payable on sight, such as “Pay to P or order
P1,000.00 at sight.”
c. When it is expressed to be payable upon presentation, such as “Pay to P
or bearer P1,000.00 upon presentation.”
d. When no time for payment is expressed, such as “I promise to pay P or
order P1,000.00.”
 Where an instrument is issued, accepted, or endorsed when overdue, it is, as
regards the person so issuing, accepting, or indorsing it, payable on demand.

7. When is an instrument payable to bearer? Enumerate 4 (5 points)Sec. 9

a. When it is expressed to be payable to bearer, such as “Pay to bearer the
sum of 1,0000.00”
b. When it is expressed to be payable to a person name therein or bearer,
such as “Pay to P or bearer the sum of 1,0000.00”
c. When it is payable to the order of a fictitious or non-existing person and
such fact is known to the person making it so payable. A fictitious person may
be an existing person but the instrument will still be considered payable to
bearer if such person was not intended by the maker or drawer to receive
payment. “President George W. Bush”
d. When the name of the payee does not purport to be the name of any
person “Cash”
When the only or last indorsement is an indorsement in blank
An indorsemnt in blank is one that specifies no indorsee. If the instrument is
originally payable to order, this will make the instrument payable to bearer.

8. As a general rule, an instrument which contains an order or promise to

do any act in addition to the payment of money is not negotiable, what
are the exceptions? Enumerate 4. (5 points)Sec. 5
a. The instrument authorizes the sale of collateral securities in case the
instrument is not paid at maturity. (Sec. 5) “Additional act of selling the
securities to be made after maturity”
b. The instrument authorizes the confession of judgment if the instrument
is not paid at maturity. (Sec. 5) “Warrant of attorney” “Cognovit note” or
“Judgment Note”
c. The instrument waives the benefit of any law intended for the protection
or advantage of the obligor. (Sec. 5)
 d. The instrument gives the holder an election to require something to be
done in lieu of the payment of money. (Sec.5) In alternative obligations, the
choice of the prestation belongs to the debtor unless it has been expressly
granted to the creditor.
9. W here and How is an Indorsement made?

Where a. on the instrument itself; or b. on a separate paper which must be

attached thereto to make an integral part of the instrument called allonge.

10. Kinds of indorsement?

f. Special
g. Blank
h. Restrictive
i. Qualified
j. Conditional

Essay
For value received, I promise to pay to bearer Pablo the
sum of Ten Thousand Pesos on 10 October 2017.
(Sgd.) Eugene
Lopez
a. Is it a negotiable instrument? If yes, what kind of negotiable instrument.
If No, why?
b. Will your answer be the same if the instrument is payable to “order of
bearer Pablo”? Explain(10 points)
Answer
a) An instrument payable “to the order of bearer” is an order instrument which
needs the indorsement of the payee (bearer) for its negotiation.
b) An instrument payable “to bearer P” or “to P, bearer” is not an instrument
payable to bearer because the word “bearer” is merely descriptive of P.
Accordingly the instrument is not negotiable because it is payable to a specified
person.
2.
 I promise to pay Pefecto or order the sum of 10,000.00
payable in two installments.

a. Is the above example a negotiable instrument?

a. Can a negotiable instrument be made payable by installments? When?
(10 points)
For the sum payable to be considered certain if payable in instalments, the
following requisites must concur:
a. The instalments must be stated.
b. The maturity of each instalment must be fixed or determinable.

If the instrument is payable in “two installments” the instrument is not

negotiable because the installments are not stated; if payable “in two equal
installments” the instrument is not likewike negotiable because the maturity of
each installment is not stated.

3. Mahal executed a promissory note payable to the order of Palos which was
blank as to the amount and delivered it to Palos. Mahal then authorized Palos
to place the amount of 15,000.00 on the promissory note. However, Palos wrote
the amount of 20,000.00 on the blank. Thereafter, he indorsed the note to
Alpha, then Alpha to Beta, Beta to Charlie, and Charlie to Helga, holder. What
are the rights and obligations of parties. (10 points)Sec. 14
Bonus
1. Requisites for an instrument to be negotiable. (5 points.)Sec. 1 or
a. Instrument must be in writing and signed by the maker or drawer;
b. It must contain an unconditional promise or order to pay a sum
certain in money;
c. Payable on demand or at a fixed or determinable future time;
d. It must be payable to order or bearer;
e. The drawee must be named or otherwise indicated in the instrument
with reasonable certainty.

2. Give me a funny joke (5 points)